Return of Capital Trumps Return on Capital: Trennert

Whether it's the creeping crisis in Europe, the uncertainty of a Chinese slowdown or our own domestic distractions, investors are clearly in a funk. There's no better indicator of this financial fear than the fact that a half dozen of the world's top-rated countries currently pay negative rates (less then zero percent) on their short term debt.

For investors like Jason Trennert, the Chief Investment Strategist at Strategas Research Partners, this worldwide retreat from risk stems from the fact that the three great global uncertainties we're facing right now (Europe, the looming fiscal cliff and our own elections) all come down to political solutions. And that simply makes things too hard to call.

"The thing that's different about these macro headwinds, is they essentially come down to political decisions where it's very very difficult to handicap. The range of outcomes is so wide, probably wider than I've ever seen it," Trennert says in the attached video. As he phrases it, investors are more interested in return of capital, rather than return on capital.

The risk, of course, is lost opportunity, but as the old saying goes, there will always be other opportunities, while lost money is gone forever.

As much as Trennert believes there is great long term opportunity in stocks now, he says it's only available to investors who can stand "an extremely volatile period in the market...like losing 20% over a matter of a few months." As a result, he's staying defensive and cautious, saying "discretion is the better part of valor" in this type of market until more clarity comes to town.

And how might that happen?

Trennert admits he's not sure, but says probably through "some sort of political leadership that gives people confidence that the rules of the game will be somewhat permanent and not capriciously changed."

There's great value in stocks, for sure, just not for the faint of heart.